Investigating other leading indicators influencing Australian domestic tourism demand

In the tourism demand literature, much of the research focuses on income and price variables as demand determinants for travel. Nevertheless, the literature has neglected other possible indicators such as consumers’ perceptions of the future course of the economy, household debt and the number of hours worked in paid jobs. In fact, several studies found that these indicators could influence consumers in making decisions to travel. In this paper, we examine whether there are other indicators that can influence future Australian domestic tourism demand. The econometric model used in this study is a panel three-stage least squares (3SLS) model. Using the data on Australian domestic tourism demand, the empirical results reveal several points: first, it is found that the consumer sentiment index has significant impacts on VFR, but not on holiday tourism. Furthermore, the business confidence index has no influence on business tourism demand. The study also finds that an increase in household debt could encourage more Australians to travel domestically, indicating that Australians may consider increasing debt as their confidence to spend increases. Lastly, working hours have a statistically significant effect in the case of holiday tourism data.